Fortune’s Marc Gunther takes a good, long look at the Washington Post Co.’s efforts to move its flagship paper from print-centric to multiplatform—and the economics of the transition. The sense of urgency comes straight from the top: Chairman and CEO Don Graham, who told Gunther: “If Internet advertising revenues don’t continue to grow fast. I think the future of the newspaper business will be very challenging. The Web site simply has to come through.” He added later: “"I don’t think any news organization has maximized the potential of the Internet. ... I know this one hasn’t.”

It’s a bit like trying to put an object in a full glass without displacing water. As Gunther points out, advertisers paid about $573 million last year to reach readers of the company’s newspapers but only $103 million to reach its eight million monthly unique visitors online. But, listing the Post Co.’s various assets including the lucrative Kaplan division, a high-powered board that includes Warren Buffett and Barry Diller, and WaPo’s perch in a region manic for news, Gunther comes to an almost scary conclusion: “If Graham and his people can’t build a business model for journalism in the digital world, nobody can.”

Diversifying: In 1990, the newspaper division accounted for 48 percent of revenues and 51 percent of operating income. By 2006, the division contributed just 25 percent of revenues and 14 percent of operating income. Instead, the bulk of revenue—43 percent—comes from Kaplan. (Kaplan also deflects some attention by investors and analysts, who know that division’s results can have a bigger impact on the company than those of the newspaper division.) Graham: “I can look our shareholders in the eye and say we should have a steady, to some extent growing, stream of income from our businesses while we try to sort out, if we can, the problems of the newspaper.”

Online goals: Make local advertising to “must buy” and increase national ad dollars. Ads aimed at local readers account for 60 percent of ad rev. National ad gains are tough online. Buffett’s musing? ”The ideal combination would be if The New York Times, The Wall Street Journal and the Post had a joint Web site, and you couldn’t get any one individually. That, you could sell for a fair amount of money, and it would have one hell of a readership.”

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